Running a small business can be rewarding, but it can also be a lot of work. And sometimes, you may experience an overwhelming rough patch, either financially or personally.
The reality is, most businesses will experience unexpected challenges. The Office for National Statistics reports show how the COVID pandemic affected businesses, but challenges can come in all forms. For example, you could experience low sales, crucial equipment breaking, or a death in the family. With that said, there are a few things you can do to keep the business running through difficult times.
This guide will discuss how to keep a business running during tough times, including:
- Getting a full picture
- Cutting costs
- Improving cash flow
- Focusing on customer retention
- Planning for a rainy day
Getting a full picture
If you struggle to run your business due to poor finances or personal issues, you need to first get a full picture of the situation. If you’re afraid to see how bad things are, It can be easier to remain in denial. But having a clear idea of your standing can help keep your business running.
To do this, organise your bookkeeping and financial statements, such as your income statement, balance sheet, and cash flow statement. Get a clear idea of your assets and liabilities. These statements will help you examine the facts.
By looking at how much available cash you have to cover financial obligations, you can better understand what you need to do to stay afloat. Plus, understanding what you spend and earn for your business can show you how to adjust for survival.
This information allows you to see what transactions help your business and which hurt it. If your struggles are primarily financial, you can use this information to create a plan for positive change. If your struggles are personal, this financial data can show how much leeway you have to recover.
With the financial data in front of you, consider your expenses and how to reduce them. First, highlight losses that haven’t brought in revenue and avoid these in the future. Then, see if there is any outsourced work that you could do yourself rather than pay others. You can also seek more cost-efficient options for expenses, such as business software or insurance rates.
When it comes down to it, you’ll need to focus on the details. The more strict you are with your business spending, the more you’ll be able to save. You could also set yourself a monthly budget to control spending.
Improving cash flow
On top of this, improving your cash flow will help you cover expenses and stay afloat. Your cash flow is the cash entering and leaving your business over a given time.
If you have poor cash flow, there are a few short-term fixes. First, you could examine your business assets to see what you may liquidate, or convert into cash. For example, say you have two espresso machines for your coffee shop. You could sell one of them to cover expenses and focus on speeding up your drink production on the remaining machine.
Another way to increase your cash is by taking out a small business loan. Of course, you’ll have to pay this back later, and it will increase your liabilities. But, it can help you get out of difficulties in the short term. You can learn more about what you’ll need to take out a loan here.
Focusing on customer retention
Trying to maintain and satisfy current clients can also help you increase the performance of your business during tough times. Client retention is more cost-effective than focusing on client growth. It can actually cost seven times or more to earn a new customer than retain an existing one.
Plus, research shows that a 5% uptick in customer retention can lead to 25-90% greater business profits. So, if you improve customer service or introduce a rewards program, you can increase profits from the customer base you have now.
With that said, still, market your business to potential clients. If you have poor finances, you could do your marketing yourself by using free design tools like Canva. On the other hand, if you struggle to balance your business with personal issues, you could automate marketing by outsourcing it or investing in tools like Google Ads.
In addition, to build a buzz around your business during tough times, consider rebranding or revamping your marketing. You can attract new audiences and earn new customers by pivoting your approach.
Planning for a rainy day
We covered a few reactive methods to keep your business running during tough times, but you could also plan for these challenges. Consider setting aside savings from your earnings each month to create a rainy day fund. This fund can cushion the impact of tough times and help you sustain cash flow.
On top of this, try establishing a backup plan for how you’ll react to personal issues that may affect your business. Will you shut down operations for a period of time or run at a lower capacity? You can cover earnings for a necessary absence with your rainy day savings. With a realistic plan, you’ll be able to support your business through challenges.
Guide your business finances through tough times with Countingup
Financial management can be stressful and time-consuming when you’re self-employed. But, when your business is going through tough times, it can be even more stressful to organise your finances. You need accounting software that streamlines the process and saves your time. That’s why thousands of business owners use the Countingup app to make their financial admin easier. Plus, you can get your first three months free.
Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like invoicing on the go and live cash flow insights, you can confidently keep on top of your business finances wherever you are.
You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward!
Find out more here and start your 3 month free trial today.